Correlation Between KGHM Polska and MACOM Technology

Can any of the company-specific risk be diversified away by investing in both KGHM Polska and MACOM Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KGHM Polska and MACOM Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KGHM Polska Miedz and MACOM Technology Solutions, you can compare the effects of market volatilities on KGHM Polska and MACOM Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KGHM Polska with a short position of MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and MACOM Technology.

Diversification Opportunities for KGHM Polska and MACOM Technology

-0.62

Correlation Coefficient

KGHM Polska  MACOM Technology

Excellent diversification

The 3 months correlation between KGHM and MACOM is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol and KGHM Polska is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KGHM Polska Miedz are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of KGHM Polska i.e., KGHM Polska and MACOM Technology go up and down completely randomly.

Pair Corralation between KGHM Polska and MACOM Technology

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.79 times more return on investment than MACOM Technology. However, KGHM Polska Miedz is 1.27 times less risky than MACOM Technology. It trades about 0.14 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.13 per unit of risk. If you would invest  2,786  in KGHM Polska Miedz on December 20, 2024 and sell it today you would earn a total of  557.00  from holding KGHM Polska Miedz or generate 19.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

KGHM Polska Miedz  vs.  MACOM Technology Solutions

KGHM Polska Miedz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, KGHM Polska reported solid returns over the last few months and may actually be approaching a breakup point.

MACOM Technology Sol

Risk-Adjusted Performance

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KGHM Polska and MACOM Technology

The main advantage of trading using opposite KGHM Polska and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, MACOM Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MACOM Technology will offset losses from the drop in MACOM Technology's long position.

The idea behind KGHM Polska Miedz and MACOM Technology Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.